2014 (11) TMI 549 - AT - Income Tax

Deletion of addition u/s 40(a)(ia) payments made for masonary and centering work Held that - AO while disallowing the expenses had noted that the expenses were incurred in cash and Assessee was liable to deduct the tax before making the payment Assessee contended that the persons to whom the payments were made, were the employees of Assessee and there was employer employee relationship and further since the payments was less than prescribed limit, Assessee was not required to deduct TDS - the submission of Assessee for not deducting TDS was not taken before AO - there is no finding of CIT(A) on the submission of Assessee that there existed employer employee relationship and the payments were below the prescribed limit - the aspect needs to be examined at the end of AO thus, the matter is remitted back to the AO for examination Decided in favour of revenue. Unexplained credits in the form of advances from various customers Held that - AO has made the addition after considering the statements given by the various creditors and on the basis of the books of accounts - assessee submitted that the statement and evidences were recorded at the back of the Assessee and the Assessee was not granted an opportunity to cross-examine the persons the submissions of the Assessee has not controverted by Revenue - in view of the principle of natural justice, Assessee should be granted on opportunity to cross-examine the persons whose statements have been relied by AO thus, the matter is remitted back to the AO to grant an opportunity to the Assessee to cross-examine the creditors and also make available evidences on which he has relied for making the additions Decided in favour of revenue. Addition made Capital contribution not reflected in bank statement Held that - AO had made the addition of ₹ 6 lacs for the reason that the amount of capital contribution was not reflected in the bank statement of the partners - assessee contended that the amount was received from Shri Vajubhai Jani and for which Assessee has also placed on record the copy of the confirmation from Vajubhai Jani and the copy of his bank account the documents were not before the AO thus, the matter is remitted back to the AO for verification Decided in favour of revenue.

Issues Involved:
1. Deletion of addition made under Section 40(a)(ia) of the Income Tax Act.
2. Deletion of addition of unexplained credits in the form of advances from customers.
3. Deletion of addition of unexplained credits not reflected in the books of accounts.
4. Deletion of addition of capital introduced by a partner.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 40(a)(ia) of the Income Tax Act:
During the assessment proceedings, the Assessing Officer (A.O.) found that the assessee made cash payments for masonry and centering work without deducting TDS, leading to a disallowance under Section 40(a)(ia). The CIT(A) deleted the addition, referencing the special bench decision in Merlyn Shipping & Transport Vs ACIT and similar jurisdictional tribunal decisions. The Revenue appealed, arguing that the payments were above the threshold and TDS should have been deducted. The assessee contended that the payments were to employees and below the threshold limit. The Tribunal found that the assessee's claim of an employer-employee relationship was not raised before the A.O. and remitted the matter back to the A.O. for re-examination, instructing the A.O. to provide the assessee with an adequate opportunity for hearing.

2. Deletion of Addition of Unexplained Credits in the Form of Advances from Customers:
The A.O. added Rs. 26.90 lakhs as unexplained credits based on discrepancies between customer statements and the assessee's books. The CIT(A) provided partial relief, noting that the amounts tallied with registered sale deeds and criticizing the A.O. for not specifying the section under which the addition was made. The CIT(A) also pointed out the error of double addition and the lack of cross-examination opportunity for the assessee. The Tribunal agreed with the need for cross-examination and remitted the issue back to the A.O., directing him to allow the assessee to cross-examine the creditors and review the evidence. The Tribunal upheld the CIT(A)'s finding of double addition regarding Rs. 2,42,180 and Rs. 8,95,000, as the Revenue did not provide contrary evidence.

3. Deletion of Addition of Unexplained Credits Not Reflected in the Books of Accounts:
The A.O. added Rs. 45,000 as unexplained credits not reflected in the books. The CIT(A) deleted the addition, stating it was covered in the amount debited in the Profit & Loss Account. The Tribunal found no reason to interfere with the CIT(A)'s decision due to the lack of contrary evidence from the Revenue.

4. Deletion of Addition of Capital Introduced by a Partner:
The A.O. added Rs. 6 lakhs as unexplained investment, noting it was not reflected in the partner's passbook. The assessee claimed the amount was a loan from Shri Vajubhai Jani, mistakenly credited to the partner's capital account. The CIT(A) deleted the addition, citing the genuineness of the transaction and the creditor's identity and creditworthiness. The Tribunal noted that the confirmation and bank statement from Vajubhai Jani were not before the A.O. and remitted the issue back to the A.O. to verify the documents. If found correct, the A.O. should not interfere with the CIT(A)'s order.

Conclusion:
The Tribunal partly allowed the Revenue's appeal for statistical purposes, remitting specific issues back to the A.O. for re-examination and verification, ensuring the principles of natural justice are upheld. The order was pronounced in open court on 14-11-2014.

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